SA excerpt from the August 2010 market report

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Adelaide’s solid and stable economy is boosting confidence in the property market despite rate rises.

A number of factors have conspired to shape a positive outlook for the year ahead in the South Australian property market. With building approvals up, unemployment levels down and capital growth steady, property buyers are showing renewed confidence in the market.

It’s a rising market, according to property valuation group Herron Todd White, thanks to an increase in house sales and a tightening of rental vacancies for both houses and units. After falling behind the pack in 2009, this capital city is looking to up the ante in the year ahead.

Though the state’s growth rate remains below the national average, values have benefitted from four consecutive quarters of positive growth, says WBP Property Group SA state manager Bart Quinn. He adds that the state is still the most affordable mainland capital city in the country.

Adelaide house prices rose by 7.52% in the 12 months to April to reach a median of $406,000, in comparison to the country SA median of $259,500, according to Residex data.

Unit values grew by 2.4% in the three months to April, with the median unit value sitting at $312,500, reports Residex. “While the unit market performed strongly in 2009, achieving record prices, it’s anticipated that growth in this segment will eventually stabilise, offering lower rates of capital appreciation than its housing counterpart,” says Quinn. “On the rentals front, overall, the market in Adelaide remains very tight, offering vacancy rates ranging from as little as 0.96% in Adelaide Hills to 1.34% in the city, enabling strong rental yields for both units and houses.” According to Residex, those yields sit at 4.11% for houses and 4.51% for units in April.

Quinn adds that investors and top-end buyers are maintaining a strong presence in the market. “Although many forecasters predicted a slow start to 2010 following the withdrawal of many first homebuyers, activity levels have persisted with renewed confidence from investors and middle and prestige buyers,” he explains.

“The growth experienced in the middle and upper market segments in recent months will continue at current levels in the short term, due largely to short supply and significant demand in inner areas,” says Quinn. “However, in the second half of 2010, prices are expected to stabilise due to pressure from higher interest rates.”

The Australian Bureau of Statistics (ABS) reported in May that SA had the largest increase in the number of private sector houses approved, with a 1.5% rise, and was one of the top three states for the number of dwellings approved, which climbed by 2.9%.

Employment in the state is also on the rise, with the ABS recording a 1.5% increase in the number of people employed in March 2010, compared to a year ago. The state’s trend estimate unemployment rate has been falling since September 2009 – reaching its lowest point in March at 4.9%, since July 2008. The state’s employment levels also rate rather well on a national scale, with the SA unemployment rate sitting lower than the national unemployment rate since May 2009.

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